TC PipeLines' (TCP) Q4 2016 Results - Earnings Call Transcript

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TC PipeLines, LP (NYSE:TCP) Q4 2016 Earnings Conference Call February 27, 2017 10:00 AM ET

Executives

Rhonda Amundson - Investor Relations

Brandon Anderson - President

Janine Watson - VP and General Manager

Nathan Brown - Controller and Principal Financial Officer

Analysts

Jeremy Tonet - JPMorgan

Shneur Gershuni - UBS

Nick Raza - Citigroup

Gabriel Moreen - Bank of America Merrill Lynch

Operator

Good day, ladies and gentlemen and welcome to the TC PipeLines, LP 2016 Fourth Quarter Results Conference Call.

I would like to turn the meeting over to Ms. Rhonda Amundson. Please go ahead, Ms. Amundson.

Rhonda Amundson

Thank you, Operator, and good morning, everyone. I would like to welcome you to TC PipeLines’ Fourth quarter 2016 conference call. I’m joined today by our President, Brandon Anderson; our VP and General Manager, Janine Watson, and our Controller and Principal Financial Officer, Nathan Brown. Please note that a slide presentation will accompany their remarks and is available on our website at tcpipelineslp.com, where it can be found in the Investor Center section under the heading Events & Presentations.

Brandon will begin today with a review of TC PipeLines’ fourth quarter highlights and results. Janine will provide an update on the partnership’s assets and the market environment, following which Nathan will provide a more detailed review of our financial results for the fourth quarter. Brandon will return and wrap up our remarks with a brief discussion of our growth strategies and close with some key takeaways. Following the prepared remarks, I will ask the conference operator to coordinate your questions.

Before we begin, I would like to remind you that certain statements made during this conference call will be forward-looking regarding future events and our future financial performance. All forward-looking statements are based on our beliefs, as well as assumptions made by and information currently available to us. These statements reflect our current views with respect to future events and are subject to various risks, uncertainties and assumptions, as discussed in detail in our 2016 10-K, as well as our subsequent filings with the Securities and Exchange Commission.

If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, actual results may differ materially from those described in the forward-looking statements. Please also note that we use the non-GAAP financial measures, adjusted earnings, adjusted earnings per common unit, EBITDA, Adjusted EBITDA and distributable cash flow during our presentation. Adjusted earnings are used to provide a more comparable earnings measure from quarter-to-quarter and exclude the impact of certain non-recurring items.

EBITDA is an approximate measure of our operating cash flow during the period and reconciles directly to net income and distributable cash flow is presented to provide a measure of cash generated during the period to evaluate our cash distribution capability. These measures are provided as a supplement to GAAP financial results, and we provide a reconciliation to the most closely related GAAP measures in our SEC filings.

With that, I’ll now turn the call over to Brandon.

Brandon Anderson

Thanks, Rhonda, and good morning, everyone, and thank you for joining us today. It’s good to be back on earnings call with all of you. As you are aware, we did suspend our calls for the last two quarters due to the ongoing MLP strategy review by our sponsor TransCanada, which was completed in November. And subsequent to that two weeks ago, TransCanada completed the acquisition of the Columbia Pipeline Partners LP, which now leaves our Partnership TC PipeLines as the sole MLP for TransCanada.

Looking at Slide 4, I’m pleased to report that TC PipeLines had another good quarter and solid annual results. We generated $60 million in net income during the fourth quarter of 2016 and $244 million on an annual basis. After adjusting for the non-cash impairment of our Great Lakes investment in the fourth quarter of 2015, our Q4 2016 earnings were comparable to our earnings in Q4 of 2015.

Looking at the full-year, our adjusted earnings were $244 million in 2016, $32 million, or 15% higher than in 2015. We generated $67 million in distributable cash flow in the fourth quarter lower than the same period in 2015, although on an annual basis, our distributable cash flow of $313 million was 8% higher.

Nathan Brown will discuss our financial results in more detail a little later in the call. We paid out $66 million of distributions to our unitholders during the fourth quarter and $250 million during the full-year of 2016. The Partnership also declared its fourth quarter distribution of $0.94 per common unit marking the 71st consecutive quarterly distribution paid to our investors.

And finally, as highlighted this morning in our news release, TC PipeLines is pleased to announce that we are in receipt of a letter from TransCanada offering to sell us a 49.3% interest in the Iroquois Gas Transmission System together with their remaining 11.8% interest in PNGTS.

Moving to Slide 5, I’ll provide a little more detail on this new development. So both the Iroquois and the PNGTS System are critical energy infrastructure assets in the U.S. Northeast and expected to play an integral role in those markets for years to come. The Iroquois acquisition would broaden our ownership base in this region and the PNGTS acquisition would bring our interest in that pipeline system to just under 62%.

The Iroquois pipeline transports gas from TransCanada’s Mainline out of Canada and from an interconnect with Algonquin system in Brookfield, Connecticut and providing key market connections right into New York City. It serves LDCs and electric power plants and similar to our other pipeline systems is supported by long-term contracts.

We believe these investments will further strengthen our cash flows and provide our unitholders with a continued source of long-term predictable and growing distributions. Funding of the transaction is anticipated to be sourced from a combination of debt and equity, the latter from the expected continued use of our ATM program.

As is our usual practice, the terms and structure of the proposed transaction are subject to satisfactory negotiation and approval by the Conflicts Committee of the Board of Directors and upon recommendation from Conflicts Committee approval by the Board. We will therefore be able to provide an update on price and other terms as the process unfolds over the next few months. We would expect the acquisition to close mid-year 2017.

I will now turn the call over to Janine Watson, our VP and General Manager to provide an update on our Partnership’s assets and our market outlook.

Janine Watson

Thanks, Brandon, and good morning, everyone.

Moving to Slide 6, in the fourth quarter, our entire portfolio of pipeline assets performed well and met or exceeded our operating expectations, reflecting the fact that our major pipeline assets are well-positioned in key areas with access to multiple basins and demand centers. In the West, we saw strong demand for transportation service on the GTN pipeline, serving energy needs in California and the Pacific Northwest.

Favorable natural gas price differentials between Western Canada and California underpinned strong discretionary flows. Our Midwest assets continue to perform well, providing valuable service to our customers consistent with their past performance last year. Specifically, Great Lakes showed consistent results, and we believe reliable cash flows will continue following the strong performance of this asset in 2016.

Northern Border continue to experience strong demand for a capacity with recent contract extensions for terms of two years or longer. The remainder of our asset portfolio performed as expected and reported continued stable results during the fourth quarter.

And now turning to our outlook. Looking forward in addition to dropdowns, TC PipeLines could benefit from a number of other developments. Our Portland Natural Gas Pipeline System provides a relatively easy expansion opportunity serving markets in New England, with greenfield projects in this region facing a number of challenges on permitting brownfield expansions on this system could provide competitive path to market.

Our GTN system is well-positioned to move incremental volume, as producers in the Western Canadian Sedimentary Basin continue to seek outlook for their growing production. Pipelines in Canada upstream of the GTN system are planning further debottlenecking activity, potentially driving incremental contracting on GTN. And Great Lakes is also well-positioned to move additional volumes from the Western Canadian Sedimentary Basin to Eastern Market. It could be a beneficiary of any long-term load attraction agreement on the Canadian mainline that could result in significant volumes of gas moving from Western Canada to Dawn.

I will now turn the call over to Nathan Brown, our Controller and Principal Financial Officer to discuss our fourth quarter financial results in more detail.

Nathan Brown

Thanks, Janine, and good morning, everyone. Moving on to Slide 7, I’ll now review the Partnership’s fourth quarter and full-year 2016 results.

Net income in the fourth quarter was $60 million, up significantly over the loss of $137 million in the fourth quarter of 2015. It equates to $0.70 per unit compared to a loss of $2.24 per unit in 2015. The loss in 2015 was the result of a non-cash impairment on our Great Lakes investment in the fourth quarter of that year to allow for more comparable metric period-over-period, the impact of this non-cash charge is excluded in our adjusted earnings, which I’ll refer to you shortly.

On an annual basis, net income in 2016 was $244 million compared to $20 million in 2015, or $3.21 per unit compared to a loss of $0.03 per unit, again, the significant difference is due to the impairment charge in 2015. The Partnership paid distribution of the $66 million in the fourth quarter, $7 million increase over Q4 2015 was primarily due to an increase in the quarterly distribution of $0.05 per common unit paid beginning in July of 2016, together with a higher number of units outstanding during the period. The increase in units outstanding was a result of unit issuances under our ATM issuance program.

Looking at 2016 versus 2015, the Partnership paid $250 million in distributions in 2016 compared to $228 million in 2015, with a difference again due to the same factors impacted the quarter. After adjusting for non-cash impairment in 2015, our adjusted earnings in the fourth quarter 2016 of $60 million are very comparable to the adjusted earnings of $62 million in Q4 2015.

Several factors impacted our Q4 2016 results, the net effect of which led to the comparability quarter-over-quarter. We enjoyed higher revenues at GTN due to additional short-term services sold to its customers during the period. PNGTS contributed to our results in 2016 versus no ownership in Q4 of 2015. The Q4 2015 resolution of regulatory proceedings involving Great Lakes inflated the quarterly results over Q4 of 2016, partially offset by higher expenses in the fourth quarter of 2015 due to dropdown costs associated with PNGTS acquisition during that quarter.

For the full-year of 2016, adjusted earnings were $244 million, or $3.12 per unit, compared to only $212 million in 2015, or $3.03 per unit. Earnings were higher in 2016 due to the net impact of higher revenues on GTN, as a result of incremental sales of open capacity, the addition of PNGTS to our portfolio of assets, generally lower expenses in 2016 both operationally and financially as we incurred no dropdown cost in 2016, and higher financial charges due to additional borrowings.

The Partnership’s adjusted EBITDA was $98 million in the fourth quarter, very comparable to that of the same period in 2015. Distributable cash flows were $67 million in the fourth quarter 2016, $7 million lower than the corresponding quarter in 2015. The decrease was primarily due to higher maintenance capital expenditures during the period and higher interest expense related to the higher debt levels primarily upon PNGTS acquisitions.

For the year ended December 31, 2016, distributable cash flow amounted to $313 million, 8% higher than the DCF of $290 million in 2015. Higher operating cash flow during the year more than offset the impact of the $12 million distribution paid to Class B units during the first quarter 2016. As a reminder, the Class B units are entitled to an annual distribution based on the performance of 30% of GTN. For 2015, the Class B units received a $12 million distribution in the first quarter of 2016.

In the fourth quarter of 2016, the 30% portion of GTN generated $10 million, all of which is allocated to the Class B units, given the annual threshold is exceeded at the end of Q2. This $10 million together with the amount of $12 million allocated to the Class B units in the second and third quarters will be put – paid to the Class B units in Q1 2017.

Turning to Slide 8. Revenues from our consolidated pipelines were higher than those in the same quarter last year by $2 million. GTN realized higher transportation revenues during the quarter from the sale of short-term services to its customers. The positive impact of equity earnings from PNGTS during the period was offset by lower equity earnings from Great Lakes resulting from the Q4 of 2015 regulatory resolution agreement.

Conclusion of this regulatory matter resulted in the recognition of deferred revenue of Great Lakes in Q4 of 2015 for certain transportation services of ANR from prior periods, and as such, we’re not indicative of a run rate and not repeated in Q4 of 2016.

Operating, maintenance and administrative expenses during the fourth quarter were $3 million lower than the same quarter in 2015, and a depreciation was comparable. Financial charges were slightly higher in the fourth quarter of 2016 versus the same period in 2015. This was due to an increase in interest expense related to additional borrowings upon the portion of the PNGTS acquisition.

Moving now to our financial position on Slide 9, our investment grade credit ratings provides us financial flexibility to continue to grow. We believe our ratings reflect our solid financial condition and outlook. The Partnership’s liquidity position remained solid. Partnership has $380 million of undrawn and available borrowing capacity under our senior credit facility as of February 24, 2017.

Our distribution coverage was strong in the fourth quarter, reflecting the positive operating performance from our assets during the period.

That concludes my remarks on the fourth quarter financial results. I’ll now turn the call back to Brandon.

Brandon Anderson

Thanks, Nathan. I’m going to move on to Slide 10. Our cash flow is derived from our portfolio of highly stable Natural Gas Pipeline infrastructure assets. Our focus remains on the optimization of our asset portfolio that may include organic growth over time such as the Carty Lateral, which was completed in 2015.

We continue to advance business opportunities over that – in the future that will fit within our geographic footprint. TransCanada Corporation owns our general partner and continues to hold a 27% interest in the Partnership. TransCanada is pursuing energy infrastructure opportunities across North America and is progressing at a large capital program, which includes C$23 billion of near-term growth opportunities together with a number of other larger commercially secured initiatives.

TransCanada continues to view our Partnership as a core element of its strategy and we expect to play a meaningful role in the funding of a sizable near-term capital program depending on market conditions and TransCanada’s financing needs. As I mentioned at the outset of this call, we noted earlier today in our earnings release that in receipt of a letter from TransCanada offering to sell us a 49.3% interest in Iroquois pipeline system and the remaining 11.8% interest in PNGTS.

Once concluded, we believe these investments will further strengthen our cash flows and provide our unitholders with continued source of long-term predictable and growing distributions. Although subject to the ultimate approval by our Board upon recommendation from the Partnership’s Conflicts Committee, we will be working towards a successful conclusion of this transaction and we’ll provide an update over the next few months.

So moving on to Slide 11, I’ll conclude with some key takeaways. TC PipeLines has demonstrated a consistent track record of solid performance and growth since our inception in 1999.

Our PNGTS acquisition furthered this trend. We increased our quarterly distribution by 6% in 2016, and we believe the $0.01 dropdown transaction will further strengthen our cash flows and provide our unitholders with a continued source of long-term predictable and growing distributions. Our unitholders benefit from a strong relationship with TransCanada, particularly as they progress through their large capital program.

With that, I’ll now turn the call back over to Rhonda.

Rhonda Amundson

Thanks, Brandon. I’d now like to open the call up for questions. Operator, please go ahead.

Question-and-Answer Session

Operator

Thank you. We will now take questions from the telephone lines. [Operator Instructions] Thank you for your patience. And the first question is from Jeremy Tonet from JPMorgan. Please go ahead.

Jeremy Tonet

Good morning.

Janine Watson

Hi, Jeremy.

Jeremy Tonet

Hi. Just want to touch base first on the Portland system and you mentioned the possibility of expanding that to get more gas into New England and we’ve certainly seen a lot of difficulties in, being able to get the gas there. And just wondering if you could provide more thoughts as far as the scale of how much you could get in there, or any thoughts on the size of that project would be helpful, as far as CapEx is concerned?

Janine Watson

Thanks, Jeremy. Well, that project is highly scalable. As you know, it’s a matter of how much compression you put on the pipeline. So really it could range from a low of say, another 40,000 or 50,000 decatherms up to almost as big as you’d like it to go, it could go 400. So that would be an awful lot. So it is difficult to give you any guidance on CapEx at this point.

Nathan Brown

Yes, I think we’re a – kind of a mid-range case of 100 to 150 a day of an incremental expansion seems to be what the market is considering. But it’s still a lot of a – lot of negotiation work left to do before we’d arrive at the ultimate project.

Jeremy Tonet

And so how should we think about the timeframe should this project come to fruition and what will be needed upstream to make this happen?

Janine Watson

There is – are various reinforcement projects that would be necessary upstream on TQM as well as the TransCanada Mainline system. And this is a project that Portland is working on together with those two upstream pipelines. Timing, it would – all these things take a year to two years to come to fruition, perhaps out into the 2020, 2021 timeframe.

Jeremy Tonet

Got you. That makes sense. And as far as distribution growth, I’m not sure if you guys touched on it, but do you have any updates as far as how you think you expect that to trend in 2017 or beyond?

Brandon Anderson

Sure. So we did in our earnings release, I think, we said that following the successful conclusion of Iroquois, once we get through our process we do expect to be able to recommend a distribution increase that will be somewhere in line or in line with our recent increases over the last couple of years.

Jeremy Tonet

Got you, great. And just thinking about the dropdown [indiscernible] economics, there’s some precedent transactions out there with regards to what you’ve done historically with PNGT and what Dominion is – were some transactions in Iroquois, and just wondering that, if you look at the numbers there maybe it comes up to a price tag of around up to $600 million or something in that ballpark. I’m wondering if the market has changed significantly since that point, where there those aren’t good markers anymore for the transaction, or any other color that you could provide just as far as how you’re thinking about the EBITDA multiple or economics of the – of this possible dropdown?

Brandon Anderson

Sure. So it is fairly early days. We know the – the offer letter was received quite recently. So we are in the middle of just gathering the team and the advisors and the due diligence process together. I’m not sure the market has changed appreciably from those other transactions. So, our expectation is that those markers will be used to inform us on the ultimate value, but it’s still subject to a negotiation.

Jeremy Tonet

That makes sense. That’s it for me. Thank you.

Brandon Anderson

Thank you.

Operator

Thank you. The next question is from Shneur Gershuni from UBS. Please go ahead.

Shneur Gershuni

Hi, good morning, guys. Just wanted to just follow up with Jeremy’s questions there. In terms of – I know that you’ve sort of said there are markets out there in [indiscernible]. I was wondering if I could ask the question in a different way. You’ve dropped assets before in the past when we look at the multiples that you have in the past. Is it fair to conclude that it will be the same, or a better multiple for TCP, or is there a chance that this multiple could be higher and less favorable for TCP?

Nathan Brown

Yes. So again, we’re in the middle of starting those negotiations. So, I think we would look at - every deal is done sort of based on the individual attributes of the pipeline, its contract rates, its – all of the – all the value drivers of the individual systems, as well as that the market data and the LP’s ability to pay.

So, given the Iroquois location, potential for expansions and other things, we – I think that it’s viewed as a pipeline that’s quite valuable. However, again, I can’t give you too much guidance on what the ultimate multiple is because it hasn’t been determined and it’s really is early days in the negotiation.

Shneur Gershuni

Okay, fair enough. And then a couple of follow-ups. Do you have at your finger tips the rough EBITDA of the…

Nathan Brown

Sure.

Shneur Gershuni

…that you’re proposing to put through even if it’s on a trailing basis?

Nathan Brown

Yes. So, yes, we can provide something from sort of the the public data that we’ve seen. So on Iroquois, I think their last section – or the last [indiscernible] 2 filing, it was about a – on a 50% basis, about $70 million of EBITDA. We do know that they did complete last year a section five rate case proceeding.

So that EBITDA is probably trending down a little bit from there, given the outcome of the rate case. But we also will have to factor in incremental sales and expansions. So about – so again, so give or take $60 million to $70 million of EBITDA from Iroquois, and EBITDA on a 100% basis trailing for PNGTS was $54 million.

Shneur Gershuni

Okay. So we’re looking roughly [indiscernible] high 50s – lows 50s on a trailing basis, is the way to think about this is what will end up in TCP?

Nathan Brown

No. So, I would think about half of – about half of Iroquois EBITDA would be something between $60 million to $70 million plus the kind of 11% of PNGTS.

Shneur Gershuni

Got it. Okay. And the – in sort of thinking about that, you’ve sort of commented in your press release about you’d like to maintain sort of the same [indiscernible] growth rate of roughly 6%. Does this mean that you are planning on running higher coverage as a result, if you end up dropping enough EBITDA right now that would have lasted more than 6% increase, is that sort of the way that we should be thinking about this, or if you sort get to a point where the drop rate accelerate given the fact that the Columbia asset has dropped and so forth, I’m just wondering how we kind of think about growth plane on a go-forward basis, not just this year, but in future years as well?

Nathan Brown

Yes, so good questions. All that we’re able to say today is, we’ve one dropdown pending and we believe that the incremental cash flows we’ll receive from this dropdown will allow us to increase distributions for this year in line with our historical practice. We’re not thinking of a conveyor belt of dropdowns from TransCanada future that has not been communicated to us.

However, we do always – as when we talk, we always look at their own financing capabilities and the very large capital program that’s coming their way. And we take a lot of comfort in that historic – historically we’ve always been a big part of their strategy and we’ll – and they’ve reaffirmed that recently. And then as we’ve said, we did get a dropdown offer this year or we’ve already gone this year. So beyond 2017 I’m not – I can’t provide additional distribution guidance today, but you saw that we did put up for this year.

Shneur Gershuni

But generally speaking, so then as at this stage right now you’re will to have one higher coverage if you get more EBITDA then you have to struggle through [ph] that 6% increase. Is that the right way to think about it?

Brandon Anderson

Well, I think, yeah, so – it really depends on how it plays out, right. So we’ve got a financing plan, we’re preparing a financing plan including an ATM issuance and depending on market conditions we would probably try to run an appropriate level of distribution coverage and would it be a little higher, it really depends. I don’t – I think we’re backing in to trying to finance this thing optimally to maximize distributions and coverage for our equity holders.

Shneur Gershuni

Okay. So then does that mean once you come up with a price less than 50% of the purchase price, it’ll be funded from fresh equity and some of it will come from the coverage ratio and so we can assume a small percentage basically?

Brandon Anderson

No, I won’t say that, I think we typically try to finance things that are on a 50-50 basis. And it really – and I don’t – you know we’re working on it. So I would probably assume more of a 50-50 financing.

Shneur Gershuni

Should I get to 50-50 financing, but what I think 50% equity, do I think some component of that is between DCF and some component of that is fresh equity, so less than 50% of the purchase price would come from fresh equity?

Brandon Anderson

Probably a little bit less will come from fresh equity, correct.

Shneur Gershuni

Okay, great. Thank you Brandon…

Brandon Anderson

Kind of go have to turn the toughest there [ph].

Shneur Gershuni

Yes, okay.

Brandon Anderson

Thank you.

Shneur Gershuni

Perfect. Thank you very much.

Operator

Thank you. The next question is from Nick Raza from Citigroup. Please go ahead.

Nick Raza

Thanks guys, I appreciate the time. In terms of the discretionary revenues on GTN, could you just talk about any opportunities over there to term those revenues up going forward?

Brandon Anderson

Sure. So actually we have been terming those up going forward as well. So what we’re seeing is, as the Western Canadian sedimentary basin, particularly the kind of the deep basin Montney areas continue to produce, the Alberta system of TransCanada is expanding and debottlenecking out the west path.

So what we’re finding customers are doing is input – utilizing short-term or interruptible capacity today. But then as those – the debottlenecking occurs upstream, we have been signing long-term contracts with shippers to take up that capacity. So you can kind of go through our list of customers and kind of review what’s happened in the last year or two. And you can see that a number of longer term deals have been done with now with Alberta producers.

Nick Raza

Okay. And do you sort of have a sense for how that term looks like?

Brandon Anderson

Sure. So we’ve been able to get five plus year contracts from Alberta producers.

Nick Raza

Okay. And then switching over to Great Lakes, are you seeing any sort of pick ups and contracting even for shorter term capacity as a thought that some of the projects over the Northeast might still be on the delay – on a delayed schedule?

Brandon Anderson

Sure, yes. So we are one of the – similar to what’s kind of going on GTN in northern border, as we continue to see the Montney and deep basin area to be as prolific as it has been. That gas is now heading incrementally down Great Lakes. So we’re seeing not just incremental volumes for kind of up to one year, maybe a little bit longer, but much higher prices as well. So we’re getting higher rates for our shorter term services than we used – than we would have gotten, say, three years ago.

Nick Raza

Okay. So are these – and just a follow-up on that. Are these sort of max rate contracts that you’re signing over the short period or it’s just interruptible?

Brandon Anderson

Interruptible contracts, you know some discounts to max rate, but discounts have certainly gone to be a lot less than they would.

Nick Raza

Okay. And just longer term, is there opportunity to make this sort of a richer line? Is that sort of something that you think about or is it even possible to convert the line into something a little bit more high BTU?

Brandon Anderson

So it’s now really something we’re thinking about for Great Lakes. I think longer term what we’re seeing is, we’re following very closely the long-term fixed price proposal that TransCanada Mainline is pursuing. And depending on the ultimate outcome of that open season we would expect to see more volumes head east out of Alberta and Great Lakes could be picking up a portion of those volumes on a longer term basis.

Nick Raza

Okay. And just to switch to some of the financing, in terms of capital calls on either one of the systems, I know that PNGTS essentially fund its own debt repayments, but what do you expect over the next, say, 12 months for Great Lakes and some of the other systems?

Brandon Anderson

So we don’t expect any major capital calls for Great Lakes or the other systems actually, I mean there’s some maintenance expenses, maintenance capital we’re obviously funding. As flows improve that maintenance CapEx can be accelerated. So that’s something that we pay attention to. We’re always cognizant of debt maturities at some of our pipelines northern border for example. So we may have to inject some equity into northern border this year and that’s something that we’re considering with our partners.

Nick Raza

Okay.

Brandon Anderson

But we have nothing – there’s no major maturities this year that we’re looking to fund.

Nick Raza

Okay, fair enough. And then I guess the sort of last question, I’m just turning back to the Northeast. Your system is, the way it is set up, could there – well, I guess, let me ask the question this way, the Iroquois system, is that bidirectional?

Janine Watson

No.

Brandon Anderson

It’s not today.

Janine Watson

Yes.

Brandon Anderson

But when we are evaluating Iroquois expansion opportunities, certainly gas hitting Iroquois potentially becoming a bidirectional system is nothing that would be into a longer term consideration.

Nick Raza

Okay, okay and would that require a lot more sort of engineering work or is it pretty straightforward deal where you just add bidirectional compression?

Brandon Anderson

So I don’t know the exact answer, I suspect it’s very straightforward, but that’s something will have to be considering.

Nick Raza

Okay, fair enough guys. That’s all I had. Thank you so much.

Brandon Anderson

Thank you.

Operator

Thank you [Operator Instructions]. And your next question is from Gabriel Moreen from Bank of America Merrill Lynch. Please go ahead.

Gabriel Moreen

Hi, good morning everyone. Most of my questions have been asked and answered, but I just had a question in terms of thinking about I guess the TransCanada portfolio, overall dropdown assets. Is it safe to say that ANR is potentially next after I guess some of these dropdowns or would you actually think about potentially even looking at the Columbia assets as sort of next acquisition candidates?

Brandon Anderson

Yes. So, again they haven’t – you know I think we would look at the – as acquisition candidates this, any of them could potentially apply, but we do look for assets that are relatively mature in their life span, but by that I just mean that they don’t have a large capital requirement in them, so it’s something that fits well within our partnership. So as these systems are being built and expanded like the Columbia system that might be a little further down the list than some of our other assets.

Gabriel Moreen

Got it, now I appreciate that. And then I guess in terms of the $1 billion per year bogie that TransCanada Corp put out last week on its call or the week before, can you just talk about, I guess, the pace of dropdown, so is this – it sounds like there’s comfort here potentially in doing maybe two dropdowns a year as opposed to the traditional one that seems to have occurred over the last couple years?

Brandon Anderson

No, so I really can’t, TransCanada has not presented to us a schedule or a conveyer belt of dropdowns. What we do see is, we’ve got the one today and we’ve got a line of sight into a very large capital program, but we don’t have a line of sight yet into subsequent drop downs. So that’s really the only the guidance we can give right now.

Gabriel Moreen

Got it. Thank you.

Operator

Thank you. There are no further questions registered at this time. I’d like to turn the meeting back over to Ms. Amundson.

Rhonda Amundson

Great, thank you everyone for your participation today. We appreciate your interest in TC PipeLines. And we look forward to speaking with you soon. Thanks.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.

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